The individual financial statements for Gibson Company and Keller Company for th
ID: 2567649 • Letter: T
Question
The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2018, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2017, in exchange for various considerations totaling $840,000 At the acquisition date, the fair value of the noncontrolling interest was $560 000 and Keller's book value was $1.120,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $280,000 This intangible asset is being amortized over 20 years Gibson sold Keller land with a book value of S90 000 on January 22017. for S190000 Keller stil holds this land at the end of the current year Keller regularly transfers inventory to Gibson. In 2017, it shipped inventory costing $198,000 to Gibson at a price of $330 000. During 2018, intra-entity shipments totaled $380.000, athough the original cost to Keller was only $266,000. In each of these years, 20 percent of the merchandise was not resold to outside parties until the period following the transfer. Gibson owes Keller $50,000 at the end of 2018 Gibson Keller Company (980,000) $(680,000) Sales Cost of goods sold Operating expenses Equity in earnings of Keller 680,000 170,000 93,000) 480,000 45,000 Net income (223,000) (155,000 Retained earnings, 11/18 Net income (above) Dividends declared (223,000) 115,000 (155,000) 60,000 Retained earnings, 12/31/18 Cash Accounts receivable Inventory Investment in Keller Land (1,404,000) (805,000) 392,000 570,000 ,011,000 150,000 14,000 590,000 500,000 570,000 480,000 2.824,000 2.230,000 Buildings and equipment (net Total assets Liabilities Common stock Additonal paid-in capital Retained earnings, 12/3118 (770,000) (500,000) (100,000) 1.404,000) 2.824,000) 2230,000) Total liabilities and equities (Note: Parenthe ses indicate a credft balance) a. Prepare a work sheet to consolidate the separate 2018 financial statements for Gibson and KellerExplanation / Answer
a. Consolidation adjustments:
Year end investment elimination entry workings:
The above value can be assigned as follows:
Entry will be:
on acquisition- customer list is recorded at fair value of 280000, which will be depreciated = 280000/20= 14000 per year.
Net value at the end of 2018= 280000 -14000*2= 252000
Adjustment will be :
Land is still in books of kelly, an adjustment will be made for unrealised profit on sale= 190000-90000= 100000
as profit is related to previous year, retained earnings adjusted above.
Inventory sale adjustmnets:
Intercompany balances elimination:
After the adjustmnets, consolidated financials are:
Value Acquisition 2018 Common stock 500000 500000 Additional paid in capital 100000 100000 Retained earnings 520000 805000 Customer list 280000 280000 1400000 1685000Related Questions
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